1. real estate

HOME
SELLER'S BOOK
Dear Home Seller,
Thank you for giving me the opportunity to help guide you through your home selling process. It
can be very confusing and sometimes complicated, but it is important to you, your family, your
future and to me. Please be assured you will receive my very best service incorporating all my
experience and training to make a committed effort to have this process be understandable, hassle
free and a pleasure for all involved. So let's get started!
The information in this handbook will educate and assist you with the following:
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Help determine your wants and needs
Steps of the selling process
Loan information
Writing, presenting and negotiating the offer
Explaining the escrow and title process
Physical inspection process
Home warranties
I look forward to working with you during the entire home selling process. I welcome any questions
you may have after reading this information. Please feel free to contact me at anytime.
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HOME
SELLER'S BOOK
SELECTING AN AGENT
Congratulations! You've taken the first step toward selling your home by deciding to select a
real estate professional to represent you. You couldn't have made a better decision than to
choose a Realtor® for help and guidance through the process. You can be assured that you
will receive excellent service along with the best opportunity to sell your home with far less
hassle and worry.
YOU CAN EXPECT YOUR REALTOR® TO.....
Assist you in setting the right price for your home. They know the market and
will help you get the best possible price.
Assess your home's marketability and show you ways to create more demand.
Actively market your house in the most effective possible manner.
Negotiate on your behalf with qualified prospective buyers.
Allow you to make your own decisions. A professional agent works for you
and respects your opinion. They will not try to force you into a decision with
which you don't feel comfortable.
Protect your rights. Real estate laws have become increasingly complicated
and your Realtor® is there to assist you in every way.
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HOME
SELLER'S BOOK
TIPS TO SELLERS
LET YOUR HOME GIVE A SMILE TO BUYERS...
First impressions are lasting. The front door greets
the prospect. Make sure it is fresh, clean and scrubbed
looking. Keep lawn trimmed.
Three's a crowd. Avoid having too many people
present during inspections. The potential buyer will
feel like an intruder and will hurry through the house.
Let the sun shine in. Open draperies and curtains and
let the prospect see how cheerful your home can be
since dark rooms do not appeal.
Silence is golden. Be courteous but don't force
conversation with the potential buyer. They want to
inspect your house - not pay a social call.
Can you see the light? Illumination is like a welcome
sign. The potential buyer will feel a glowing warmth
when you turn on all your lights for an evening
inspection.
Music is mellow. But not when showing a house.
Turn off the blaring radio or television. Let the agent
and buyer talk, free of disturbances.
Pets underfoot? Keep them out of the way preferably out of the house.
Repairs can make a big difference. Loose knobs,
sticking doors and windows, warped cabinet drawers
and other minor flaws detract from home value. Have
them fixed.
Be it ever so humble. Never apologize for the
appearance of your home. After all, it has been lived
in. Let the trained salesperson answer any objections.
This is his/her job.
From top to bottom. Display the full value of your
attic and other utility space by removing all unnecessary
articles.
In the background. The salesperson knows the
buyer's requirements and can better emphasize the
features of your home when you don't tag along. You
will be called if needed.
Decorate for a quick sale. Faded walls and worn
woodwork reduce appeal. Why try to tell the prospect
how your home could look when you can show them
by redecorating? A quicker sale at a higher price will
result. An investment in new kitchen wallpaper will
pay dividends. Safety first. Keep stairways clear. Avoid
cluttered appearances and possible injuries.
Why put the cart before the horse? Trying to dispose
of furniture and furnishings to the potential buyer
before they have purchased the house often loses a
sale.
A word to the wise. Let your Realtor® discuss price
terms, possession and other factors with the buyer.
He/she is eminently qualified to bring negotiations to
a favorable conclusion.
Make closets look bigger. Neat, well-ordered closets
show space is ample.
Arrange bedrooms neatly. Remove excess furniture.
Use attractive bedspreads and freshly laundered
curtains.
Use your agent. Show your home to prospective
customers only by appointment through your agent.
Your cooperation will be appreciated and will help
close the sale more quickly.
Bathrooms help sell homes. Check and repair caulking
in bathtubs and showers. Make this room sparkle.
Fix that faucet! Dripping water discolors sinks and
suggests faulty plumbing.
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HOME
SELLER'S BOOK
CONTRACT TO CLOSING
1.
Contract signed and dated
2.
Escrow opened and earnest money deposited
3.
Title Report Requested
4.
Seller orders termite inspection
5.
Property inspection ordered by the Buyer
Original termite certificate to Escrow Company
6.
Buyer arranges insurance for home and provides
information to lender and Escrow Company
7.
Loan application made
8.
Copy of inspection to Buyer and Seller
Buyer provides Seller with repair priority list
9.
Lender orders appraisal
10.
Completed appraisal
11.
Seller/Buyer negotiates and then orders repair work
12.
Buyer is approved by Lender
13.
Other inspections, if needed or requested by Buyer
14.
Repairs completed and approved by Lender and Buyer
15.
Final contingencies removed
16.
Final closing date set
17.
Confirm closing figures with Escrow Officer
Buyer must bring check in order to close
18.
Closing
19.
Title Policy Issued
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HOME
SELLER'S BOOK
THE LOAN PROCESS
PREQUALIFICATION/INTERVIEW
Application interview
Lender obtains all pertinent documentation
ORDER DOCUMENTS
Credit report, appraisal on property, verifications
of employment, mortgage or rent and funds to
close, landlord ratings, preliminary title report
LOAN SUBMISSION
The loan package is assembled and
submitted to the underwriter for approval
DOCUMENTATION
Supporting documents come in
Lender checks on any problems
Requests for any additional items are made
LOAN APPROVAL
Parties are notified of approval
DOCUMENTS ARE DRAWN
Loan documents are completed and sent to escrow
Borrowers come in for final signatures
FUNDING
Lender reviews the loan package
Funds are transferred by wire or check
RECORDING OF DOCUMENTS
Title company records the note and deed of
trust at the county recorder's office
Escrow is now officially closed
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HOME
SELLER'S BOOK
TYPES OF LOANS
Adjustable Rate Mortgage
Adjustable rate mortgages have an interest rate that is adjusted at certain
intervals based on a specific index during the life of the loan.
Balloon Payment Loan
A fixed rate loan that is amortized over 30 years but becomes due and
payable at the end of a certain term. May be extendable or may roll-over
into another type of loan.
Buy-Down Loan
Buy-Down loans are fixed rate loans where the interest rate and the
payment are reduced for a specific period of time by paying the interest up
front to subsidize the lower payment.
Community Homebuyer's
Program
A fixed rate loan for first time buyers with a low down payment, usually
3-5%, no cash reserve requirement and easier qualifying ratios. Subject
to borrower meeting income limits and attendance of a four hour training
course on home ownership.
Conventional Loan
Conventional loans are sometimes more lenient with the appraisal
and condition of the property. When you are buying a "fixer upper" you
may need to use a conventional loan. Homes purchased above the FHA
loan limit are usually financed with conventional loans.
FHA Loan
FHA loans are insured by the Federal Housing Administration under
H.U.D. They offer a low down payment and are easier to qualify for than
conventional loans.
Fixed Rate Loan
A fixed rate loan has one interest rate that remains constant throughout
the life of the loan.
Graduated Payment Mortgage A fixed rate loan that has payments starting lower than a standard fixed
rate loan, which then increases by a predetermined amount each
year for a set number of years
Non-Qualifying Loan
(Assumable)
Non-Qualifying loans are pre-existing loans which can be assumed by a
buyer from the seller of a property without going through the qualifying
process. The buyer pays the seller for their equity and then starts making
payments.
VA Loan
VA loans are guaranteed by the Veterans Administration. A veteran must
have served 180 days active service.
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HOME
SELLER'S BOOK
LIFE OF AN ESCROW
Prepare Escrow Instructions
& Pertinent Documents
Obtain
Signatures
Process Financing
Order Title Search
Receive & Review
Preliminary
Request Beneficiary
Statement
Request or Prepare
New Loan Application
Request Demands (if any)
Request Clarification of
Other Liens (if any) and
Review Taxes On Report
Receive Beneficiary
Statement and Enter into
File. Review Terms
of Transfer and Current
Payment Status
(is prior approval
necessary to record?)
Obtain Loan Approval
and Determine That
Terms Are Correct
Receive Demands and
Enter into File
Request Loan
Documents
Review File to Determine That All Conditions
Have Been Met and That All Documents Are
Correct and Available for Signature
(Termite inspection, contingencies released,
fire insurance ordered, additional documents,
second deed of trust, bill of sale etc.,
have been prepared.)
Figure File and Request Signatures on all
Remaining Documents
Forward Documents
to Title Company
Obtain Funds
From Buyer
Request Loan Funds
Receive Loan Funds
Order Recording
Close File
Prepare Statements and Disburse Funds
Complete Closing
Forward Final Documents to all
Interested Parties
(Buyer-Seller-Lender)
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Return Loan
Documents
HOME
SELLER'S BOOK
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HOME
SELLER'S BOOK
WHAT IS AN ESCROW?
An escrow is an independent "stakeholder" account and is the vehicle by which the interests of all parties
to the transaction are protected.
The escrow is created after you execute the contract for the sale of your home and becomes the depository
for all monies, instructions and documents pertaining to the sale. Some aspects of the sale are not part of
the escrow. For example, the buyer and seller must decide which fixtures or personal property items are
included in the sales agreement. Similarly, loan negotiations occur between the buyer and the lender. Your
real estate agent can guide you in these non-escrow matters.
HOW DOES THE ESCROW PROCESS WORK?
The escrow officer takes instructions based on the terms of your Purchase Agreement and the lender's
requirements. The escrow officer can hold inspection reports and bills for work performed as required by the
purchase agreement. Other elements of the escrow include hazard and title insurance, and the grant deed from
the seller to buyer. Escrow cannot be completed until these items have been satisfied and all parties have
signed escrow documents.
HOW DO I OPEN AN ESCROW?
Either your real estate agent or the buyer's agent may open escrow. As soon as you execute the Purchase
Agreement, your agent will place the earnest money deposit into an escrow account at the escrow company.
WHERE DOES THE BUYER'S MONEY GO?
Written evidence of the deposit is generally included in your copy of the sales contract. The funds will then be
deposited in a separate escrow or trust account.
WHAT INFORMATION DO I NEED TO PROVIDE?
You may be asked to complete a Statement of Identity as part of the paperwork. Because many people have the
same name, the Statement of Identity is used to identify the specific person in the transaction through such
information as date of birth, social security number, etc. This information is considered confidential.
HOW LONG IS THE ESCROW?
The amount of time necessary to complete the escrow is determined by the terms of the purchase agreement.
It is normally 45 to 60 days, but can range from a few days to several months.
WHAT HAPPENS NEXT?
Unless he/she is paying cash, the next step will be that the buyer will apply for a mortgage loan. Your real
estate agent will be able to keep you informed about the progress of the loan application. During the escrow
process, you are still required to make your payments on existing loans so that you do not incur any late fees
or damages to your credit rating.
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HOME
SELLER'S BOOK
WHAT A TITLE COMPANY DOES
PREPARES A PRELIMINARY TITLE REPORT AND POLICY
Prelim report: A preliminary report contains the following vital information, which can affect the close of
escrow: ownership of the subject property, how the current owners hold title, matters of record
that specifically affect the subject property or the owners of the property, a legal description of
the property and an informational plat map.
Title report:
A report showing the condition of title before a sale or loan transaction.
After completion of the transaction, a title insurance policy is issued.
Policy:
Title insurance is insurance against loss resulting from defects of title to a
specifically described parcel of real property. Defects may run to the fee
(chain of title) or to encumbrances on the property.
PAYS OFF EXISTING LOANS
The title company pays off existing loans when so ordered.
RECORDING DOCUMENTS
The title company records the appropriate documents with the county office, giving public notice.
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HOME
SELLER'S BOOK
PAYING OFF YOUR EXISTING LOANS...
Unless the buyer takes over your existing loan(s) on the property, the loan(s) will
be paid off during the escrow process. You will need to furnish complete
information to your escrow officer and real estate agent on each loan against
your property. Please be prepared to provide the name of the lender, the loan
number, address and phone number of the lender. Your escrow officer will need
this information to order the loan payoff demands, so the loan(s) may be paid off
correctly during the escrow. Homeowners' Association information may also be
required if you are selling a condominium, townhouse or property located in a
planned unit development. All of this information will help to insure the timely
closing of the escrow.
DISCLOSURES
AND
CONTINGENCIES...
During the process of selling your property, you will be asked to fill out a property
disclosure form, which is now required by law. In this document, you will inform
the buyer of any significant facts you have about the condition of the property.
There will be various contingency dates in your real estate sales contract. You
should be very aware of these and be sure that the actions required are performed
in a timely manner. Such contingencies include: the buyer's loan approval,
approval of the Preliminary Title Report and approval of termite and other
inspections. Stay closely in touch with your real estate agent regarding these
important dates.
When the loan is approved and the loan documents are sent to the escrow officer
or the escrow assistant handling your transaction, the escrow instructions and the
deed will be prepared.
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HOME
SELLER'S BOOK
A LOOK AT SOME WAYS TO TAKE TITLE
Community Property:
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Requires a valid marriage between two people
Each spouse holds an undivided one-half interest in the estate
One spouse cannot partition the property by selling his or her interest
Requires signatures of both spouses to convey or encumber
Each spouse can devise (will) one-half of the community property
Upon death, the estate of the decedent must be “cleared” through probate, affidavit or adjudication
Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death
Joint Tenancy:
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Parties need not be married; may be more than two joint tenants
Each joint tenant holds an equal and undivided interest in the estate, unity of interest
One joint tenant can partition the property by selling his or her interest
Requires signatures of all joint tenants to convey or encumber the whole
Estate passes to surviving joint tenants outside of probate
No court action required to “clear” title upon death of joint tenant(s)
Deceased tenant’s share is entitled to a “stepped up” tax basis as of the date of death
Community Property with Right Of Survivorship:
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Requires a valid marriage between two people
Each spouse holds an undivided one-half interest in the estate
One spouse cannot partition the property by selling his or her interest
Requires signatures of both spouses to convey or encumber
Estate passes to surviving spouse outside of probate
No court action is required to “clear” title upon the first death
Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death
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HOME
SELLER'S BOOK
ESCROW INSTRUCTIONS...
Escrow instructions define all the conditions that must occur before the transaction can
be finalized. The escrow instructions represent your written statement to the escrow
holder protecting your interests and specify, in a debit and credit format, the disposition
of the sales proceeds and the conditions under which the Grant Deed may be recorded in
favor of the new buyer.
A Grant Deed is the document which legally transfers your title to the property to the
new owner. You will sign the Grant Deed as part of the escrow instructions and the deed
will be notarized by your escrow officer or another qualified notary public. Proper
identification is needed for this procedure. The Grant Deed is recorded at the time escrow
closes.
Your escrow officer or real estate agent will contact you for an appointment to sign your
escrow instructions and the Deed. At this time, the escrow officer will inform you of the
amount of proceeds you will receive from the sale of your home. If you are also purchasing
another home, arrangements can be made to transfer funds to your purchase escrow.
YOUR APPOINTMENT...
An appointment is required for the sign-off. Please call your escrow officer to arrange
a convenient time and expect the process to take approximately one hour.
There are several acceptable forms of identification which may be used during the
escrow process. These include: A current driver's license, Passport, etc. One of these
forms of identification must be presented at the signing of escrow in order for the
signature to be notarized.
On rare occasions, funds are insufficient to close escrow and you, the seller, must deposit
money into the escrow. Should this situation occur, you will need to obtain a cashier's
check or certified check issued by a California financial institution made payable to the
escrow company in the amount indicated to you by your escrow officer or escrow
assistant. A personal check may delay the closing since the escrow company is required
by law to have good funds before disbursing funds from escrow. Similarly, an out-ofstate check could cause a delay in closing, due to delays in clearing the check.
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HOME
SELLER'S BOOK
H O W T O TA K E T I T L E I N C A L I F O R N I A
CORPORATE OFFICE
(800) 540-3515
TENANCY IN
COMMON
PARTIES
DIVISION
TITLE
Any number of persons
(can be husband and wife,
but see “Presumption”
limitations below)
Ownership can be divided
into any number of
interests equal or unequal.
Each co-owner has a
separate legal title to his
undivided interest.
POSSESSION
Equal right of possession
(only unity of interest
required).
CONVEYANCE
Each co-owner’s interest
may be conveyed
separately by its owner.
Tenancy in common
dissolved by conveyance of
co-tenant interest to a new
owner, a tenancy in
common is created
between grantees and
remaining co-tenant’s.
PURCHASER’S
STATUS
DEATH
Purchaser will become a
tenant in common with the
other co-owners in the
property.
On co-owner’s death, his
interest passes by will to his
devises or his heirs by
intestate succession. No
survivorship right.
COMMON WAYS OF HOLDING
TITLE CONCURRENT
CO-OWNERSHIP INTERESTS
COMMUNITY
PROPERTY
JOINT TENANCY
TENANCY IN
COMMUNITY PROPERTY
PARTNERSHIP W/ RIGHT OF SURVIVORSHIP
Only husband and wife. Only partners
Any number of persons
(any numbers).
(can be husband and wife).
Only husband and wife.
Ownership interest must be Ownership and
managerial interests are
equal.
equal, except control of
business is solely with
managing spouse.
There is only one title to
Title is in the
the whole property. (Joint
“community”.
ownership in undivided
equal shares).
Equal right of possession. Both co-owners have
A joint tenant can be in
equal management and
exclusive possession of the control with similar
property or he can lease
absolute power of
his interest to a third party disposition.
without affecting the nature
of the joint tenancy. Such
lease will terminate upon
the death of the lessor joint
tenant, with the surviving
joint tenants taking the
interest therein.
Conveyance by one coA spouse may not make a
owner without the others
gift of or dispose of
breaks his joint tenancy.
community property without
Ownership
interest is in
relation to
interest in
partnership
Title is in the
“partnership”.
Ownership and managerial
interest are equal, except
control of business is solely
with managing spouse.
Equal right of
possession but
only for partnership
purposes, absent
consent of other
partners to the
contrary. The
partnership
property belongs to
the firm and not the
individual partners.
Both co-owners have equal
management and control
with similar absolute power
of disposition.
Any authorized
partner may
convey whole
partnership
property. No
partner may sell
or assign his
interest in specific
partnership
property without
the consent of
and in
conjunction with
all co-partners.
A spouse may not make a
gift of or dispose of
community property without
valuable consideration and
written consent of the other
spouse; “Necessaries”
(furniture, furnishings, or
fittings of the home, or the
clothing or wearing apparel
of the other spouse or minor
children) may not be
disposed of without the
written consent of the other
spouse.
Purchaser can
only acquire the
whole title.
Purchaser can only acquire
whole title of community,
cannot acquire a part of it.
On partner’s
death, his
partnership
interest passes to
the surviving
partner(s)
pending
liquidation of the
partnership.
Share of
deceased partner
then goes to his
estate.
Upon the death of one
spouse, title to the property
passes to the surviving
spouse by operation of law,
to the exclusion of the heirs
and creditors of the deceased
spouse. The survivor holds
title to the property as his
sole and separate property.
Community property with
right of survivorship cannot
be disposed of by
testamentary disposition, and
it does not pass to the heirs
of the decedent by interstate
succession.
valuable consideration and
written consent of the other
spouse; “Necessaries”
(furniture, furnishings, or
fittings of the home, or the
clothing or wearing apparel
of the other spouse or
minor children) may not be
disposed of without the
written consent of the other
spouse.
Purchaser will become a
tenant in common with the
other co-owners in the
property.
Purchaser can only
acquire whole title of
community, cannot
acquire a part of it.
Upon the death of one spouse,
On co-owner’s death,
title to the property passes to the 1/2 belongs to survivor
surviving spouses by operation
as separate property,
of law, to the exclusions of the
1/2 goes by will to
heirs and creditors of the
decedent’s devises or
deceased spouse. The survivor
by succession to
holds title to the property as his survivor.
sole and separate property. Joint
tenancy property ownership
cannot be disposed of by
testamentary disposition, and it
does not pass to the heirs of the
decedent by interstate
succession.
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Title is in the “community”
HOME
SELLER'S BOOK
H O W T O TA K E T I T L E I N C A L I F O R N I A
CORPORATE OFFICE
(800) 540-3515
TENANCY IN
COMMON
COMMON WAYS OF HOLDING
TITLE CONCURRENT
CO-OWNERSHIP INTERESTS
COMMUNITY
PROPERTY
JOINT TENANCY
TENANCY IN
COMMUNITY PROPERTY
PARTNERSHIP W/ RIGHT OF SURVIVORSHIP
SUCCESSOR’S
STATUS
Devisees or heirs become
tenants in common.
Upon death of joint tenant,
survivors continues in
ownership of entire
property as joint tenants.
If passing by will,
tenancy in common
between devisees and
survivor results.
Heir or devisees
have rights in
partnership
interest but not in
specific
partnership
property.
Upon death of one spouse,
survivor continues in
ownership of entire property
including share of the
deceased spouse. Surviving
spouse continues to own
entire title, including former
title interest of deceased
spouse.
CREDITOR’S
STATUS
Co-owner’s interest may be
sold on execution sale to
satisfy his creditor.
Purchaser becomes a
tenant in common with
remaining co-tenants.
Termination may occur as a
result of involuntary sale
(e.g., execution sale under a
judgment or a foreclosure
sale under a mortgage or
deed of trust).
Mortgage or deed of trust
executed by one joint
tenant or a judgment lien
against interest of one joint
tenant, does not sever joint
tenancy or affect right of
survivorship unless
property is sold by
foreclosure or execution
sale prior to death of the
party who incurred the lien.
Community property is
generally liable for a debt
incurred by either spouse
before or during marriage,
regardless of which spouse
has management and
control of the property or
which spouse is party to the
debt. Earnings of married
person during marriage are
not liable for pre-marital
debt of other spouse if
earnings from which debt is
paid remains
uncommingled with other
community property and
held in account where other
spouse does not have
access; community property
not liable for debts incurred
subsequent to separation.
Earnings of a spouse are
not liable for the debts of the
other spouse contracted
before the marriage.
Partnership real
estate may be sold to
pay partnership
debts. If the interests
of creditors will not
be adversely
affected, in lieu of
sale of the property,
the partners may be
awarded their
respective interests
in the property or it
may be partitioned.
Creditors receive
priority in payment of
partnership liabilities,
a partner’s right in
specific partnership
property is not
subject to
attachment or
execution, except on
a claim against the
partnership.
Community property is
generally liable for a debt
incurred by either spouse
before or during marriage,
regardless of which spouse
has management and
control of the property or
which spouse is party to the
debt. Earnings of married
person during marriage are
not liable for pre-marital
debt of other spouse if
earnings from which debt is
paid remains uncommingled
with other community
property and held in account
where other spouse does
not have access; community
property not liable for debts
incurred subsequent to
separation. Earnings of a
spouse are not liable for the
debts of the other spouse
contracted before the
marriage.
PRESUMPTION
Deed must expressly vest
Favored in doubtful cases
title in the name of the
except husband and wife
case. Reference to husband grantees as joint tenants.
and wife in the deed of sale,
without mention of any
other form of ownership,
creates statutory
presumption that the
property is community in
nature.
Generally, all real
property in this state
and all personal
property wherever
situated acquired
during marriage by a
married person while
domiciled in this state
is community property.
Presumption does not
apply to property
acquired before
marriage or after
marriage by gift,
bequest, devise or
descent. If deed grants
property to spouses as
“husband and wife”
presumption is what
property is held as
community property.
Arises only by
virtue of
partnership
status on
property placed
in partnership.
Partner’s interest
cannot be seized
or sold separately
by his personal
creditor, but his
share of profits,
may be reached
by a personal
creditor. Entire
property may be
sold on execution
sale to satisfy
partnership
creditor.
Deed must expressly vest
title in the name of the
spouses as “husband and
wife as community property
with right of survivorship”
and deed may be signed by
the grantees.
THIS IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. SPECIFIC QUESTIONS FOR ACTUAL
REAL PROPERTY TRANSACTIONS SHOULD BE DIRECTED TO YOUR ATTORNEY OR C.P.A.
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HOME
SELLER'S BOOK
TITLE INSURANCE
Most real estate transactions are closed with a title insurance policy. Many home buyers just
assume that when they purchase a piece of property, possession of the deed to the property is
all they need to prove ownership. This is not true. Hidden hazards may attach to real estate.
A property owner's greatest protection is a policy of title insurance...
WHAT IS TITLE INSURANCE?
It is a contract of indemnity which guarantees that the title is as reported and, if not reported and the
owner is damaged, the title policy covers the insured for their loss up to the amount of the policy.
Title insurance assures owners that they are acquiring marketable title. Title insurance is designed to
eliminate risk or loss caused by defects in title from the past. Title insurance provides coverage only for
title problems which were already in existence at the time the policy was issued.
THE TITLE SEARCH
Title companies work to eliminate risks by performing a search of the public records or through the title
company's own plant. The search consists of public records, laws and court decisions pertaining to the
property to determine the current recorded ownership, any recorded liens or encumbrances or any other
matters of record which could affect the title to the property. When a title search is complete, the title
company issues a preliminary report detailing the current status of title.
THE PRELIMINARY REPORT
A preliminary report contains the following vital information, which can affect the close of escrow:
ownership of the subject property, how the current owners hold title, matters of record that specifically
affect the subject property or the owners of the property, a legal description of the property and an
informational plat map.
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THE PRELIMINARY REPORT
The preliminary report indicates the type of title insurance offered by the title company. It also
indicates the exclusions and exceptions from coverage under which the policy will be issued...
REVIEWING THE PRELIMINARY TITLE REPORT
The preliminary report should be reviewed immediately with special attention to the
following areas...
Verify the ownership vesting. Make sure the names on the report are the same as
the names on the purchase contract.
Read the informational notes for important facts about the property.
Carefully review the exceptions: bonds, deeds of trust, current taxes,
CC&R's and easements.
Look for surprises. If you can't locate an easement, if an unexpected deed of trust
appears, etc., call your escrow officer right away. Let your title company be the problem
solver. Top notch escrow officers and title companies go out of their way to resolve
problems quickly and accurately.
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AFTER THE SIGN-OFF
What next after
completion of the
sign-off?
After you and the buyer have signed all the necessary instructions and documents, the
escrow officer will return them to the new lender for a final review. Following the
review, which usually occurs within a few days, the lender is ready to fund the buyer's
loan and advises the escrow officer so that the necessary work can be completed to
record the documents and "close" the escrow.
What is "escrow
closing"?
It signifies legal transfer of title to the property from the seller to the buyer and is the
culmination of the transaction.
Usually the Grant Deed and Deed of Trust are recorded within one working day of the
escrow's receipt of loan funds. This completes the transaction and signifies the "close
of escrow." Once all the conditions of the escrow have been satisfied, the escrow
officer advises you of the date the escrow will close and takes care of the technical
and financial details, including paying off your loan.
When do I receive
proceeds from the
sale?
A final settlement statement and a check for the proceeds will be available to you the
day the sale is completed, documents are recorded and the escrow is closed.
AFTER THE CLOSE...
What happens after
escrow closes?
After the loan has been finalized, the documents signed and recorded, and the financial
settlement completed, there are still several steps which must be accomplished to
complete the transaction.
Your existing loan is being paid in full from the escrow. Your lender is required by
law to issue a full reconveyance of their loan. As soon as the deed of reconveyance
removing the previous Deed of Trust is received, it should be recorded and the
original returned to you. This may take several weeks. However, you need not be
concerned by this delay since it is normal.
What happens to
funds held in
escrow?
In some cases, the escrow holder will be instructed to hold funds in escrow to pay
off obligations which may not be completed until after escrow closes. An example
might be a set-aside of funds to correct a structural problem, remodeling or termite
repair work. Upon completion of the project and receipt of the proper documentation
and releases, the escrow officer will disburse the reserved funds.
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INSPECTIONS
Real estate contracts often contain contingency clauses that allow buyers to inspect the property
physically (usually at their expense). This inspection provides a comprehensive review of the
infrastructure of the property.
Which inspections to order is usually a matter of observation and knowledge of what is critical to
a particular region or area. Below is a list of the three most common types of inspection:
STRUCTURAL PEST CONTROL
To determine any active infestation by wood destroying organisms
Section I on the report will be items that need immediate attention because of
active infestation. Lenders usually want the work performed prior to funding the loan.
Section II on the report will be items that could cause infestation and, if not corrected,
could cause damage.
PHYSICAL INSPECTION
This inspection encompasses roof, plumbing, electrical, heating and any other
accessible area of the structure.
A detailed report will be written with recommendations for repair or for further
inspection by a specialist.
SOME OTHER INSPECTIONS
Well and Septic
Hazardous Materials
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Contractor's Home Inspection
Chimney Inspection
Heating and Air Conditioning
Structural Engineering
Energy Audit
HOME
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HOME WARRANTIES
As a Real Estate professional, it is my duty to inform both Buyers and Sellers about the
advantages of home warranty protection. This policy protects the Buyer by paying for certain
repairs and costs of major mechanical systems and major appliances in the home such as
heating and air-conditioning. There are a variety of plans available, and I would be happy
to gather a selection of plans for you to review.
BENEFITS OF HOME WARRANTY COVERAGE TO THE SELLER
Home may sell faster and at a higher price
Optional coverage during the listing period
Protection from legal disputes that occur after the sale
Increases the marketability of your home
BENEFITS OF HOME WARRANTY COVERAGE TO THE BUYER
Warranty coverage for your major systems and built-in appliances
Protects your cash flow
Puts a complete network of qualified service technicians at your service
Low deductible
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SELLER CONTACTS
REAL ESTATE AGENT
ESCROW OFFICER
LENDER
TITLE OFFICER
PHYSICAL INSPECTOR
INSURANCE AGENT
OTHER IMPORTANT CONTACTS: ________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
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MOVING EXPENSES
When you meet the IRS's definition of a qualifying move, the following items are tax deductible:
TAX DEDUCTIBLE MOVING EXPENSES:
The cost of trips to the area of a new job to look for a home. Your home
shopping expedition does not have to be successful for the cost to be deductible.
The cost of having your furniture and other household items shipped,
including the cost of packing, insurance and storage for up to 30 days.
The cost of getting your family to the new home town, including food and
lodging expenses on the trip.
The cost of lodging and 80% of food expenses for up to 30 days in the new
home town, if these temporary living expenses are necessary because you
have not yet found your ideal home or it is not ready when you arrive.
Certain costs associated with the sale of your old home and purchase of the
new one. These expenses, including real estate commissions, legal fees, state
transfer taxes and appraisal and title fees, could be used either to reduce the
gain on the sale of the previous home or to boost the basis of the new one. But
it's usually beneficial to count them as moving expenses up to the allowable dollar
limits, because that gives you an immediate tax benefit.
Provided for informational purposes only. Consult your tax or legal advisor for advice on your particular
situation.
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MOVING CHECKLIST
OLD RESIDENCE
Changing Address
Moving Preparation
Forward address at post office
Credit card accounts
Publications
Bank accounts
Defrost refrigerator
Auto transportation needs
Pet transportation needs
Travel cash or checks
Hand carry jewelry and valuables
Leave keys
Leave garage door openers
Utilities to Cancel
Telephone, check for refund
Gas & Electric, check for refund
Water, check for refund
Garbage
Propane
Cable, check for refund
Medical Services to Obtain
Medical records
Dental records
Veterinarian records
School transcripts for kids
NEW RESIDENCE
Government Licenses & Services
Changing Address
Ask postman to hold mail for your arrival
Utilities
Telephone: new number ________________
Gas & Electric
Water
Garbage
Propane
Cable
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Apply for state driver's license
Register car
New address on driver's license
Register to vote
Register children in school
Medical Services
New doctor
New dentist
New veterinarian
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REAL ESTATE GLOSSARY...
Adjustable Rate Mortgage
(ARM)
A mortgage with an interest rate that changes over time in line with movements
with the index.
Adjustment Period
The length of time between interest rate changes on an ARM. For example,
a loan with an adjustment period of one year is called a one year ARM which
means that the interest rate can change once a year.
Amortization
Repayment of a loan in equal installments of principal and interest rather
than interest only payments.
Annual Percentage Rate
(APR)
The total finance charge (interest, loan fees, points expressed as percentage
of the loan amount)
Assumption of Mortgage
A buyers' agreement to assume the liability under an existing note that is
secured by a mortgage or deed of trust. The lender must approve the buyer in
order to assume the loan.
Cap
The limit on how much an interest rate or monthly payment can change,
either at each adjustment or over the life of the mortgage.
CC&R's
Covenants, Conditions and Restrictions. A document that controls the use,
requirements and restrictions of a property.
Closing Statement
The financial disclosure statement that accounts for all of the funds received
and expected at the closing of the escrow, including deposits for taxes, hazard
insurance and mortgage insurance.
Due on Sale Clause
An acceleration clause that requires full payment of a mortgage or deed of
trust when the secured property changes ownership.
Earnest Money
The portion of the down payment delivered to the seller or escrow agent by
the purchaser with a written offer as evidence of good faith.
Federal National Mortgage
Association
Popularly known as Fannie Mae. A privately owned corporation created by
Congress to support the secondary mortgage market. It purchases and sells
residential mortgages insured by FHA or guaranteed by VA as well as
conventional home mortgages.
Finance Charge
The total cost a borrower must pay, directly or indirectly, to obtain credit.
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REAL ESTATE GLOSSARY...
Graduate Payment
Mortgage
A residential mortgage with monthly payments that start at a low level and
increase at a predetermined rate.
Home Inspection Report A qualified inspector's report on a property's overall condition. The report
usually covers an evaluation of both the structure and mechanical systems.
Home Warranty Plan
Protection against failure of mechanical systems within the property. Usually
includes plumbing, electrical, heating systems and installed appliances.
Index
The measure of interest rate changes used to determine adjustments in an
ARM's interest rate over the term of the loan.
Joint Tenancy
An equal, undivided ownership of property by two or more persons. Upon
death of any owner, the survivors take the decedent's interest in the property.
Lien
A legal hold or claim on property as security for a debt or charge.
Loan Commitment
A written promise to make a loan for a specified amount on specific terms.
Loan to Value Ratio
The relationship between the amount of the appraised value of the property,
expressed as a percentage of the appraised value.
Margin
The number of percentage points the lender adds to the index rate to calculate
the ARM interest rate at each adjustment.
Negative Amortization
This occurs when monthly payments fail to cover the interest cost. The interest
not covered is added to the unpaid principal balance so that even after several
payments you could owe more than you did at the beginning of the loan.
Origination Fee
A fee or charge for establishing a new loan.
PITI
Principal, interest, taxes and insurance.
Point
An amount equal to 1% of the principal amount of the investment or note.
The lender assesses loan discount points at closing to increase the yield on
the mortgage to a position competitive with other types of investments.
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REAL ESTATE GLOSSARY...
Prepayment Penalty
A fee charged to the mortgagor who pays a loan before it is due.
Private Mortgage
Insurance
Insurance written by a private company protecting the lender against
loss if the borrower defaults on the mortgage.
Purchase Agreement
A written document in which the purchaser agrees to buy certain real
estate and the seller agrees to sell under certain terms and conditions.
Also called a sales contract.
Tenancy in Common
A type of joint ownership of property by two or more persons with no
right of survivorship.
Title Insurance Policy
An insurance policy which protects the purchaser, mortgagee or the
party against liens or encumbrances against their property.
VA Loan
A loan that is guaranteed by the Veterans Administration and made by a
private lender.
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HOMESELLER'S GLOSSARY...
Agency
A legal relationship in which someone (principal) hires someone else (agent) to
represent them to a third party.
Application Fee
A fee to cover some of the charges of the loan process.
Appraisal Fee
A fee charged by the lender for an appraisal.
Assessed Value
The value placed on property by the County Assessor District as a basis for
taxation.
Balloon Payment
An instance in which the final installment payment on a note is greater than the
preceding payments, and pays the note in full.
Chain of Title
A history of conveyances and encumbrances affecting the title of real property.
Conventional Mortgage
A mortgage securing a loan made by investors without government
underwriting - that is, not FHA insured or VA guaranteed.
Convey or Conveyance
Process of transferring ownership of property from one person to another.
Courier Fee
Charges for delivery.
Credit Report Fee
Assessed by the lender for a required credit report from a credit bureau.
Deed
A document which, when properly executed and delivered, conveys title of real
property.
Disclosure
To make known or public. When dealing with real property, all disclosures should
be made in writing.
Discount Points
A negotiable fee paid to the lender to secure financing for the buyer. Discount
points are up-front interest charges to reduce the interest rate on the loan over the
life, or a portion, of the loan's term. One discount point equals one percent of the
loan amount.
Earnest Money
Money deposited by a buyer as evidence of good faith.
Encumbrance
Anything that affects or limits the ownership of real property, such as mortgages,
liens, easements or restrictions of any kind.
Escrow Fee
Charged by the title company to service the transaction and to escrow money
and documents.
Escrow
The deposit of documents and funds with instructions to a neutral third party to
carry out the provisions of an agreement or contract.
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HOMEBUYER'S GLOSSARY...
Exclusive Right To
Sell Listing
A written agreement between owner and agent giving agent the right to sell a
property and collect a fee for a set term.
Fair Market Value
The price at which a willing seller would sell and a willing buyer would buy,
neither being under abnormal pressure.
Loan Origination Fee
Normally 1% of the loan amount, charged by the lender to the buyer.
Mortgage
A legal document that provides security for repayment of a promissory note.
Mortgagee's Title Policy
Required by lenders to ensure that the lender has a valid lien. It does not protect
the buyer. Also required for 2nd mortgages.
Owner's Title Policy
Insures the buyer against loss due to any defect of the title not excepted to or
excluded from the policy.
Points
Paid by the buyer or seller. One point is equal to one percent of the loan amount.
Principal
The employer of an agent in an agency relationship.
Recording Fee
Charged by the County Recorder to record documents in the public records. Charges
are based on number of pages recorded.
Septic Inspection
The septic system must have certificate by the city or county Health Department.
Survey
Survey of property required by lender; shows lot size, easements, any
encroachments, locations of improvements, etc. . . .
Tax Service Fee
Required by the lender for collection and disbursement of tax escrow by a
servicing company.
Termite Inspection
Required by lender to show property free and clear of active termites.
Time is of the Essence
Demands punctual performance in a binding contract.
Title Policy
Insurance policy on the ownership of real property, against defects in title.
Title
In dealing with Real Property, title means ownership.
Underwriting Fee
Charged by a lender to underwrite the loan.
VA Funding Fee
Veteran's Administration charge for originating a VA loan.
Warehouse Fee
Charged by the lender to hold the loan locally before selling it in the secondary
mortgage market to an investor.
Zoning
Act of city authorities specifying type of use for which property may be used.
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HELPFUL REMINDERS...
If you wish to transfer funds to another escrow or wire transfer funds, arrangements
must be made in advance with the escrow officer.
In the event that you wish to use a Power of Attorney, arrangements must be made one to
two weeks in advance with the escrow officer and the Power of Attorney must be approved
by the buyer's lender and your title company. These arrangements should be made as
early as possible in the transaction.
Please bring appropriate identification with you to the escrow company, so that your
identity can be verified by the notary public.
Should the funds deposited in escrow be insufficient for closing, you will need to bring
a cashier's check or certified check to the title company for the remainder of the purchase
price. Either type of check should be from a California bank or savings and loan and
should be issued in the exact amount of the balance due. The amount of the balance may
be obtained by phoning the escrow officer prior to signing the papers. The check should
be made payable to your escrow company.
THE FOLLOWING IS A BRIEF LIST OF THE BEST SOURCES
FOR ASSISTANCE FOR CERTAIN COMMON QUESTIONS...
Details of your Sales Agreement
Real Estate Agent
Possession and key to home
Real Estate Agent
Loan requirements and financial matters
Lender Mortgage Company
or Real Estate Agent
Escrow Instructions
Escrow Officer or Escrow Assistant
Title Reports or Policy
Title Officer or Title Assistant
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NOTES
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NOTES
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NOTES
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